The Process of Economic Development

By James M. Cypher; James L. Dietz | Go to book overview

5

Developmentalist theories of economic development
After studying this chapter, you should understand:
• the concept of hidden development potential in less-developed nations;
• the possibility of market failure and the role of positive externalities in creating virtuous circle effects;
• the importance of social overhead capital and a nation's augmentable initial endowments to growth;
• balanced versus unbalanced growth strategies and their shared paradigmatic perspective;
• the theory of export pessimism;
• backward and forward linkage effects and their key role in development;
• the idea of hidden comparative advantage;
• the potential role of surplus labor as a stimulant to growth in Lewis's dualist framework for transition; and
• Rostow's stages of growth theory, particularly the "take-off" stage.

Introduction

After the Second World War, and particularly after the quick success of the United States-financed Marshall Plan in helping to rebuild the European economies, several economists who had been directly involved either in the Marshall Plan or with institutions such as the United Nations and the World Bank, turned their attention to the question of economic development of less-developed regions. Among these early pioneers of development thinking were the Finnish economist Ragnar Nurkse, the Austrian economist Paul Rosenstein-Rodan, the German-born economist Albert Hirschman, the West Indian and later Nobel Laureate economist, Sir Arthur Lewis, and the American economic historian Walt Whitman Rostow. Only Lewis remained outside of the policy-making institutions in the late 1940s and early 1950s, but by 1957 he too was employed by the UN.

In a broad sense, the ideas of these early development economists were mutually supportive. They formed a loose school of thought on the issue of economic development, emphasizing a less theoretical and more historical and practical approach to the question of how to develop-particularly in relation to those who stressed the applicability of neoclassical models, such as the Solow model discussed in the last chapter. Like any such school of analysis, there were differences of emphasis and

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